The pound is riding high on the back of growing optimism surrounding Brexit and coronavirus vaccines…
The pound recorded some impressive gains as markets reopened after the weekend, with GBP/EUR pushing to €1.1261, GBP/USD hitting $1.3365 and GBP/AUD rising to AU$1.8250. GBP/CAD and GBP/NZD have also recorded gains, achieving C$1.7448 and NZ$1.9237 respectively.
Today’s run of PMI reports for the UK, Eurozone and US will be of interest, but coronavirus and Brexit news are more likely to inspire currency market movement.
What’s been happening?
The pound derived some support from the UK’s latest retail sales report ahead of the weekend, with a surprise increase in monthly sales growth of 1.2%.
The US dollar, meanwhile, came under pressure as upbeat headlines regarding coronavirus vaccine trials reduced demand for safe-haven currencies.
Over the weekend UK Chancellor Rishi Sunak downplayed the impact of a ‘no trade deal’ Brexit, but it still appears that both UK and EU officials believe a deal is within reach.
According to the Financial Times: ‘British officials said Mr Johnson may speak to Ursula von der Leyen, European Commission President, later in the week to try and unlock the talks, which remain stuck on familiar issues’.
This morning there was further positive coronavirus vaccine news, with the Oxford University vaccine showing 70% protection. While this is less effective than the Pfizer and Moderna vaccines, the Oxford University jab costs less and is easier to store and distribute.
What’s coming up?
On today’s economic calendar we have a rush of PMI reports.
Data for Germany has already been released, with the figures showing a sharper than expected contraction in the German services sector, but a better-than-anticipated manufacturing reading.
The UK’s flash services and manufacturing PMIs for November are due out shortly. The services gauge is expected to have fallen back into contraction territory, sliding from 51.4 to 42.5 as England returned to lockdown.
The manufacturing gauge is also forecast to show a decline from 53.7 to 50.5.
Finally we have the US PMI readings this afternoon, following the release of the Chicago Fed National Activity Index.
Of course, investors will also be paying close attention to an upcoming announcement from Boris Johnson.
The PM is due to explain his ‘Covid-19 winter plan’ to the House of Commons, including what will happen when England’s lockdown ends on 2 December and how families will be able to celebrate Christmas.
The pound could extend gains if it appears that the economy will be able to largely reopen for the festive period.
We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.